G.M. Bows to Request by Biggest Shareholder July 7, 2006
The company was authorized to begin “exploratory talks” with Renault and Nissan on a possible three-way alliance.
DETROIT, July 7 ? Bowing to a request by its biggest shareholder, Kirk Kerkorian, the board of General Motors today authorized the company to begin “exploratory talks” with Renault and Nissan on a possible three-way alliance.
Statement from G.M. Audio Report Automakers Begin a Difficult Dance The Times’s Micheline Maynard reports from Detroit on the next step in negotiations for an alliance between General Motors and Nissan and Renault. Go to Report ? (mp3)
But in a show of support for G.M.’s top management, the board named its embattled chief executive, Rick Wagoner, to lead the team of company executives that will hold discussions with Renault and Nissan. No deadline was set for conclusion of the talks.
At the same time, the G.M. board also backed the turnaround plan that Mr. Wagoner, who is also the board’s chairman, began implementing last year. The plan is meant to reverse the company’s loss of $10.6 billion in 2005 and shore up its North American market share, which has been dwindling.
In the talks, Mr. Wagoner will square off against Carlos Ghosn, who runs both Renault and Nissan and who, many analysts say, might take Mr. Wagoner’s place if the proposed alliance is created ? something that is nowhere near certain, given the complexity of such a deal.
Mr. Ghosn and Mr. Wagoner are scheduled to meet in Detroit on July 14, when Mr. Ghosn will be in town to visit Nissan’s North American technical center.
Mr. Kerkorian, who holds 9.9 percent of G.M. shares, sent letters to all three companies a week ago, asking them to hold talks on a three-way alliance. The letters followed a meeting between Mr. Kerkorian and Mr. Ghosn in Nashville last month.
Mr. Kerkorian, through his advisor, Jerome B. York, has pushed G.M. to move faster on its overhaul. In a speech last January, Mr. York held up Mr. Ghosn’s swift restructuring methods as a model for Mr. Wagoner to follow. Mr. York joined the G.M. board in February.
Renault said in a statement that the company looks forward to starting talks soon now that the General Motors board has voted to go ahead. Officials at Nissan had no immediate comment.
On Monday, the boards of Renault and Nissan authorized the opening of talks, on condition that G.M. management and its board also supported the discussions.
Mr. Kerkorian’s proposal calls for Renault, the leading French automaker, and Nissan, the Japanese automaker it controls, to invest $3 billion by each buying a 10 percent share of G.M.
“The G.M. Board of Directors authorized management to proceed with its plan to consider ideas the other two companies have and to weigh the potential benefits of such an alliance in order to assist the board in its decision making,” a G.M. director, George Fisher, said in the company’s statement.
The statement did not mention Mr. Kerkorian’s request, made last week, that the board form a committee to look into an alliance together with management.
Neither did it mention whether any outside financial advisors would be used by management to assess the alliance idea, an issue that people with knowledge of Mr. Kerkorian’s thinking had raised this week.
Rather, the statement said, “management will keep the board well informed and the directors, of course, will closely monitor the process to assure that its outcome serves the best interests of all G.M. shareholders.”
In a statement, Mr. Kerkorian’s company, Tracinda, said it was “pleased” at the G.M. board’s action, but that it wanted the directors to examine the proposal themselves.
“We believe that the upcoming meeting between Mr. Wagoner and Mr. Ghosn is a good first step, but a full and objective evaluation of this unique opportunity will require establishment of a board committee that receives independent financial and legal advice,” the Tracinda statement said.
Mr. Wagoner, in the statement, said G.M. management would approach the discussions “with an open mind ? eager to hear their ideas of how an alliance between our companies might work to our mutual benefit.”
Earlier this week, news reports in Detroit and elsewhere suggested that the company’s management would tell the board today that an alliance would be too complex and distracting to attempt while G.M. was trying to fix itself.
Those reports apparently alarmed Mr. Kerokorian. People with knowledge of his thinking said he worried that his proposal would be sabotaged before the board had a chance to review it.
But G.M. officials said yesterday that management would recommend to the board that it authorize talks. And today, Mr. Wagoner said management was committed to a “thorough and objective review” of the alliance idea.
“General Motors has a lot of experience with different types of alliances, and some have provided significant benefits to G.M.’s competitive position and financial strength,” Mr. Wagoner said.
In fact, the company’s record in linking up with rivals is mixed. It has a long association with Japan’s biggest auto company, Toyota: they builds cars together in a joint-venture plant in California. But an association with one of Europe’s biggest carmakers, Fiat of Italy, ended badly, with G.M. having to pay $2 billion to extricate itself.
While it is proud of its successful venture with Daewoo of South Korea, G.M. recently ended ventures with two Japanese companies, Suzuki and Fuji Heavy Industries, the parent of Subaru.
- Posted in : Uncategorized, GM
- Author : arnold
Comments»
no comments yet - be the first?